What is an ETF?

What are exchange-traded funds? And when should investors use them? We examine how to buy ETFs and what the risks are

Emma Wall 10 March, 2014 | 10:38AM

ETFs are funds that are traded on a stock exchange like shares. They are a pooled investment fund, where an individual can gain exposure to a particular index or commodity, providing the investor with the same returns as the underlying market.

There is an extremely wide range of ETFs available to the investor, who can invest in things as diverse as soy beans, forestry and timber, as well as a FTSE 100 tracker or corporate bond fund ETF.

They are a type of passive investment, meaning there is no asset-selecting fund manager supported by an active management team. Instead, as the process is highly automated ETF fees are very low – less than 0.5% in most cases.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
iShares Core FTSE 100 ETF GBP Dist598.60 GBX0.71

About Author

Emma Wall  is former Senior International Editor for Morningstar

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